CERTAIN INTERNATIONAL MARKETS HAVE A STRONGER NEAR-TERM BACKDROP THAN U.S. MARKETS
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SELECT TECHNICAL OBSERVATIONS
International Markets: Aided by a weak U.S. Dollar, both relative strength and advance-decline analysis suggest the international technical backdrop is healthier than the U.S. technical backdrop. Chart below.
Domestic Advance-Decline Lines: The single "A-D Line non-confirmation" that occurred in early August remains in effect. Unless a series of non-confirmations occur, the odds favor a trading range over the next four to six weeks, versus a more serious decline. Nonetheless, given the weak seasonal period still in effect, please continue to identify and manage downside risk tolerance levels. Chart below.
S&P 500 (2444.24): Demand for stocks, defined by the percentage of stocks above short-term and long-term moving averages (50-day and 200-day respectively), remains lacking and leaves my near-term tactical view "cautious." Near-term tactical support exists at 2417, followed by "in and around" 2400 and then the rising 200-DMA. Near-term tactical resistance exists between 2455 and 2460, followed by 2475. Chart below.
What will I be watching to discern a renewed desire on the part of Wall Street to buy stocks? An excellent guidepost would be a day where advancing volume is 90% of total advancing and declining volume or two consecutive days in which advancing volume is 80% of total advancing and declining volume. Additionally, a contraction in the number of stocks making new 52-week lows during a period of domestic market weakness would increase the odds that a low has been established.
Side note: The weak U.S. Dollar has been a headwind for domestic Small Cap stocks. Any near-term strength in the U.S. Dollar could provide a much-needed boost for the Russell 2000. RUT chart below.
Gold: Since early June, I've discussed the importance of resistance at $1300. Specifically, for at least the intermediate-term trend to turn bullish, "a close above resistance 'in and around' $1300 will be necessary in order for a sustainable uptrend to occur." While the chart below wasn't updated at the time of this writing, the precious metal closed at $1315.30 (continuous contract) yesterday. Consistent with this, my intermediate-term opinion is bullish. Chart below, please excuse the typo inside the chart.
Have a wonderful start to your week. Please know that Day Hagan Asset Management appreciates your support and hard work!
Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management
—Written 8.28.2017. Chart sources: Stockcharts.com.
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